Managing a Car Loan

Sunday, February 28, 2010

What Happens When You Can't Pay the Claim Judgment Difference of a Car Loan?

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If you are unable to make payments to your lender after a repossession, a court judgment likely entitles the lender to collect the balance due on the loan. While your lender may still accept a payment plan if you act quickly, it can garnish your wages to collect the money you owe.

You might not have to pay the total judgment amount. Contact the party handling your account, whether the lender, its lawyer or a collection agency. Review your summons, contact your previous lender or ask the court to obtain the contact information of the entity suing you. Before calling, review your budget to determine how much you can afford to pay each month. Offer to make payments to satisfy your remaining loan balance.

A repossession and history of late payments damage your credit rating. Both instances remain on your credit report for at least seven years. Once the collector wins its case against you, the judgment is also reported to the credit bureaus. The loan account information and a judgment are listed separately on your credit report. If you satisfy the judgment amount, it still remains on your credit report for seven years. If you don't pay the balance, the judgment may remain on your credit report indefinitely, depending on the creditor.

You may be able to settle your debt with the creditor for less than the amount owed. If you pay a lump sum, the creditor might take far less for your debt. If you settle the debt, the repossession and judgment listed on your credit report will update to reflect the settlement payment. The amount excluded from your debt is considered income by the Internal Revenue Service. For example, if you owe $8,000 on your car loan and settle for $3,000, you must claim $5,000 as income on your taxes.

If you don't settle your debt or pay it off, the debt collector may garnish your wages. After the judgment, your employer may obtain a court order to collect payment automatically from your paycheck each pay period. Bankrate.com warns that a creditor may take as much as 25 percent of your paycheck. Garnishment rules differ by state, and several states don't allow wage garnishment for repossessions or credit card debts. Speak with a lawyer to find out if you're at risk for wage garnishment.

How to Request an Automobile Payoff Letter

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When buying a new car, you may prefer to sell the old car outright rather than roll the old loan into a new car payment. Although you could wait to buy the new car until you make the monthly payments and the loan is satisfied, you do have the option to pay the car loan early. Request an automobile payoff letter from the loan originator. An automobile payoff letter provides the total amount of money needed to pay off the loan on your car and receive title.

Instructions

Find your initial loan documents. Review the documents for a prepayment penalty clause and the terms of the penalty. Calculate the amount of the penalty, if there is one.

Compose a short letter. Place the loan number under the address with the make, model and vehicle identification number of the car. These items should be on your loan documents. Add a line requesting a payoff amount for your car. Mail the letter with your monthly payment.

Call the loan company. Give your loan number, which is the same on the coupon sent with the loan, and ask for the credit department. Explain to the credit department representative that you would like a written letter with the payoff amount for your vehicle.

Visit the loan company's online website, if you make online payments. Click on the "Contact Us" tab that provides you an email address or opens up a form to complete. Request a payoff letter for your car.

Check the company's online website for the payoff amount. Click on the "Payment," "Make Payment" or "Payment Information" tab that should open a "Prepayment" option. Select the "Prepayment Option." The screen provides you the total amount due to repay the loan. Not all companies offer this option.

How to Shop for a Vehicle at a Car Dealership

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Buying a car is an experience that almost everyone goes through at some point, and walking into a dealership for the first time can be fairly intimidating. With the many sales tactics that dealers use, it helps to be able to go into the situation with some knowledge of what to expect. Otherwise, you may be pressured into a deal that you are not comfortable with and a car that you do not really want.

Instructions

Research the car that you are interested in. Get on the manufacturer's website and find out everything that you can about the car. This gives you the knowledge you need to make an educated decision before you ever get to the dealer. Check out third-party resources to see what other people are paying for the car. The manufacturer's website may also provide pricing and information about rebates or other promotions.

Talk to a sales associate. Once you arrive at the dealership, it should be a short time before a sales associate initiates a conversation with you. Find out about any dealer promotions or incentives that may be offered in addition to manufacture programs. Provide the sales associate with basic information about why you are there, but never seem desperate to buy the car -- the associate may use this against you.

Test drive the car. Once you find the make and model that you like, ask the associate to allow you to take a test drive. She may simply give you the keys and let you drive it around, or the associate may have to come with you on the ride. This will give you an idea of how the car handles and help you decide whether you really want it.

Negotiate the various aspects of the deal with the associate. Once you make it clear that you are interested in making a purchase, the associate will typically take you to a desk or a room to negotiate the deal. Negotiate each aspect of the deal separately: Work out a trade-in price for your vehicle, then settle on a final price for the car and financing arrangements. Many dealers try to lump everything together so that they can make a larger profit without you knowing it, according to ConsumerReports.org.

Agree to the terms of the sale. If you finance the deal through the dealership, you will sign loan documents as well as a sales contract. If you pay in cash or already have financing arranged, you will provide the payment to the dealer and sign the sales contract.

How to Get Current for a Defaulted Car Payment

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When your car payment is even one day late, it's considered to be in default. Late payments can cause a variety of problems, including late fees and interest accrual. If you're at least 30 days late with a car payment, it will be reported on your credit report, which can lower your credit score. Falling too far behind in your car payments can lead to repossession of your car. To get current on your payments, you'll need to make payment arrangements with the lender. If you haven't been late before, the lender may waive the late fee as a one-time courtesy (this policy may vary from lender to lender).

Instructions

Ask your lender for a deferral. If you're having difficulty making your payment, check with the lender to see if you qualify for a deferral, which will push your payment back to the end of the contract. This will give you time to get the money together so that the payment can be made. The lender will provide you with the necessary paperwork to fill out.

Find out about an auto loan refinance. Apply with your lender or another lender to get your loan refinanced. Submit a refinance application; if the application is approved, your loan terms will change and your next payment will not be due until 30 to 45 days later.

Call your lender and make payment arrangements. Lenders will often take your payment right over the phone. Give the representative your bank routing number and your checking account number; the money will be taken from your bank account in approximately 24 to 48 hours. Sometimes the lender will scan the payment, which means the money is removed immediately from your checking account. If you can't afford to make the payment now, ask for a little more time.

Make a payment with a credit card. Many lenders accept credit cards for payments. The representative will need your card account number and the expiration date; in some cases, you'll also need to provide the three-digit security code on the back of the credit card. The representative will confirm the amount that needs to be paid, including late charges.

Get a confirmation number from the lender. As soon as your payment is processed, the lender will provide you with a confirmation number that serves as proof that you made your payment. Write the number down for safekeeping. Review your checking account balance to make sure the correct amount of money was taken out.

What Happens if I Cosign on a Car With Someone & Then They Die?

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A cosigner of a car loan is legally responsible for repaying the loan if the person who took out the car loan defaults in his repayment obligations. If the original borrower dies, the cosigner has legal liability to resume the repayment obligations. The lender can file suit against the cosigner to enforce payment of the car loan should the cosigner refuse to assume the repayment obligations of the deceased borrower.

Borrowers who are relatively young or who have a poor credit history may find it difficult to secure a car loan. In such cases, to mitigate their risk, lenders will grant the loan only if the borrower obtains a cosigner. By agreeing to assume the borrowers payment obligations if the borrower defaults in the terms of repayment, the cosigner limits the lenders risk.

Legally, a cosigner is as much a party to the contract as the borrower who received the proceeds of the loan. The fact that the cosigner received nothing of value from the lender is immaterial for purposes of establishing his contractual liability. Even though the borrower is the one principally responsible under the loan contract, a cosigner is jointly liable as well. If the borrower is unable to or refuses to repay the loan, the lender can seek recourse against the cosigner. The death of the borrower does not relieve the cosigner from his legal obligation to assume the repayment obligations.

Should the cosigner refuse to assume payment of the deceased borrowers car loan, the lender would have legal recourse against the cosigner and, in the absence of fraud, would be able to secure an enforceable judgment against the cosigner for the balance of the car loan due.

A cosigner may have executed a separate and legally binding contract with the borrower that provides that, in the event the borrower defaults in his repayment obligations, the cosigner will be entitled to reimbursement from the borrower for all sums he has paid the lender under the terms of the car loan. If the borrower dies, the cosigner may have an action for reimbursement against the borrowers estate. However, the cosigners action against the borrowers estate in no way relieves him of his legal obligation to pay the remaining balance due on the car loan.

First Steps for Car Buying

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Some people love buying new cars while others despise the entire process. Buying a car can be confusing, especially if dealership sales people talk fast and act pushy. Whether you love or hate car buying, doing your homework before you walk through the dealership doors saves time, money and peace of mind.

Examine your finances to determine how much you're willing and able to spend an a car. You might decide that you don't have enough funds to buy a car outright, in that case you'll need to take out an auto loan requiring monthly loan payments. Many dealerships will finance your loan, but banks and other institutions also offer auto loans. If you decide that a loan is your best option, consider what monthly payment amount falls within your budget. Banks or dealerships may only be willing to finance up to a certain amount, based on your income and credit history. Consider setting up a loan counseling meeting with your lender before you begin researching cars so that you can easily determine the price range available to you.

Both types of cars have benefits and drawbacks. New cars cost more, but are less likely to need repairs. Used cars cost less, but they have had wear and tear that could equal an unappealing appearance. Used cars will also need more maintenance than newer counterparts. If you decide on a used car, ask the dealer for a history report of the vehicle. This report tells you about any accidents or major repairs in the car's past.

Online information, such as car prices, features and dealership locations is a valuable resource for car shoppers. Kelley Blue Book's Used Car Retail Values is an often used industry standard for used car prices. Consumer Reports magazine lists the pros and cons of newer cars in its annual new car buying issue released in April. The United States Government's Federal Trade Commission website lists laws concerning car buying and advises how to avoid used car fraud.

You can choose a car dealership in several ways. Through research you might discover the exact model of car that you want and find a dealership that carries that model car. Your bank might steer you towards a dealership that accepts its loan financing. Or, you might choose a dealership that can finance your auto loan itself.

Automobile Sales Tax Calculations in Tennessee

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The Tennessee state sales tax on an automobile is 7 percent of the purchase price less the value of a trade-in. Tax rates differ by county. For instance, the Knox County sales tax is 2.25 percent of the first $1,600 of the sale price. For purchases in excess of $1,600, the sales tax is 2.75 percent.

Tennessee imposes a sales tax of 7 percent of the purchase price of the automobile less the total value of the trade-in. For instance, the sales tax on a vehicle with a sales price of $10,000 with a buyer trade-in worth $2,000 is ($10,000 - $2,000) x 0.07 = $560.

Depending on the county in which you live, an additional local sales tax is applied to the purchase price of the automobile. Knox County assesses a 2.25 percent sales tax on the first $1,600 of the price of the vehicle, but no more than $36. If the purchase price of the vehicle exceeds $1,600, the local sales tax is 2.75 percent, not to exceed $44.

Besides state and local taxes, you also pay fees for purchasing an automobile. Knox County charges a title fee of $11 and a $24 license plate fee. A wheel tax of $36 brings the fees to $71. Other fees charged in Knox County include a transfer or existing plate fee of $14.50 and a $2 mail-in registration fee.

Before purchasing a vehicle in Tennessee, understand the local state tax rates to properly budget your car purchase. Understand that the purchase price, local sales tax rates, and miscellaneous fees such as registration fees will increase the cost of owning the vehicle.